A Year in Life of the Internet

The dot-com fairy tale turned into a
macabre farce this year as one e-commerce company after another
flopped and business bystanders clucked about the stupidity of it
all.

But it wasn’t so long ago that plenty of smart people thought
selling dog food, plush sofas and barbecue grills over the Internet
were good ideas.

Today’s prevailing consensus about the absurdity of these
e-commerce concepts illustrates how much the dot-com landscape has
changed in the past 12 months. The Young Turks of the New Economy,
once hailed as inspired visionaries, now widely are derided as
shortsighted buffoons.

“There always have been dumb ideas in business, but you don’t
usually see so many of them at one time,” said Philip Kaplan, who
runs a Web site with a profane name that features a satirical
dot-com dead pool for Internet failures.

It’s All Academic With These Guys

Marc Benioff, a former Oracle Corp. executive who is chairman of
San Francisco-based Salesforce.com, said he couldn’t believe some
of the business decisions made at other dot-com companies during
the year.

“A lot of these guys were writing Harvard Business School case
studies, but they weren’t writing them on how to build a
business,” Benioff said. “They were writing them on how to torch
a business.”

Amid all the dot-com detritus, a few clever — and even
potentially revolutionary — ideas emerged during 2000, too.

Here, then, is a look at some of the year’s dot-com duds and
delights:

Not Ready for Prime Time

Super Bowl XXXIV was billed as a coming-out party for the 13
dot-com companies that shelled out an average of $2.2 million for
30-second commercials aired during the game.

The ads were plenty slick, but they didn’t accomplish much — they mostly attracted customers who discovered that the featured
sites were more about style than substance.

“A lot of these companies forgot that good advertising only
makes a bad product fail faster,” said Clark Wood, vice president
of marketing for AutoTrader.com, one of the few e-commerce Super
Bowl advertisers that didn’t regret spending all that money.

At least two of the Super Bowl dot-com advertisers — Pets.com
and Epidemic.com — have since closed their doors and several others
are struggling to survive.

Stupid Pet Tricks

Online pet stores seemed to multiply faster than rabbits until
fickle financial markets performed their form of euthanasia.

When the year began, there were five major online pet e-tailers
— Pets.com, Petstore.com, Petopia.com, Petsmart.com and
PetPlanet.com. Together, they raised roughly $400 million from
venture capitalists and the stock market.

As the year ends, just two of the original five, Petopia.com and
Petsmart.com, are still peddling dog food over the Internet.

If it weren’t for all those stupid pet tricks, online furniture
stores might have been e-tailing’s biggest debacle of the year.

As it was, three high-profile furniture e-tailers — UrbanDesign.com, Living.com and Furniture.com — wound up taking a
bench seat this year. Turns out most people want to sit on a sofa
or recliner before they buy it. And apparently someone forgot
shipping all that heavy stuff to people’s homes costs a whole lot
of money.

World’s Leading Breakfast Cereal Portal

AllAdvantage.com was financially disadvantaged from the get-go.
The Hayward, Calif.-based company built its entire business around
the idea of paying its members to surf the Web. The company
promised to pay anyone 53 cents per surfing hour as long as they
used an AllAdvantage browser that kept an advertising bar on their
screen at all times.

It didn’t quite work out the way that AllAdvantage envisioned.
The company budgeted for just 30,000 members in its first four
months. Instead, millions signed up for the service, costing
AllAdvantage $33 million in its first three months alone.

Last month, AllAdvantage laid off 35 percent of its work force —
about 150 employees — and promised to develop a new business
strategy.

Then there was San Francisco-based BBQ.com, which thought it
could cook up an online business from the $18 billion per year
industry for barbecue grills and all their fixings. The company got
skewered instead.

And Flake.com sounded like a plot out of an old Seinfeld
episode. The site aimed to become the world’s leading breakfast
cereal portal. In June, it became a site about nothing.

A Breakthrough in E-commerce

PayPal.com, a fast-growing online payment network, may emerge as
the year’s most significant breakthrough in e-commerce. The Palo
Alto, Calif.-based service and its holding company, X.com, allow
merchants and consumers to set up online financial accounts and
then send digital cash payments through e-mail.

Founded by Peter Thiel and Elon Musk in late 1999, PayPal opened
more than 5 million online accounts this year and is adding about
600,000 new members each month.

Now comes the hard part: making money. After offering the
service for free at first, PayPal began imposing a service fee on
its heaviest users.

In another sign of how a simple idea can turn into something big
on the Internet, iWon.com established itself as one of the Web’s
most popular destinations with a familiar promotion: a sweepstakes.
The site offers cash prizes to its visitors every day. The more
frequently that surfers click on iWon’s site, the better chance
they have of winning.

The result: iWon boasts one of the Web’s most loyal
constituencies — precisely the kind of traffic that appeals to the
advertisers that ultimately pay iWon’s bills.

The Irvington, N.Y.-based site’s sweepstakes system, conceived
by co-founders Bill Daugherty and Jonas Steinman, isn’t cheap, but
it’s not as expensive as it might look.

The company awards $27 million in prizes per year, including a
$1 million monthly prize and a $10 million jackpot on Tax Day, but
because the money is paid out over 25 years, iWon actually spends
about $17 million annually.

IWon’s pockets are deep. It has raised $205 million so far and
its investors include media giant Viacom Inc., which owns about
one-third of the business.